Briefing Note on the attempted coup and business by Chris Sidoti

March 17th, 2021  •  Category Briefings  •  Author: SAC-M

 The FFM recommendations

In 2017 the UN Human Rights Council established an Independent International Fact Finding Mission to investigate and report on allegations of ‘recent’ human rights violations in Myanmar. The FFM interpreted ‘recent’ as going back to 2012. The FFM presented reports to the Council in 2017 and 2018. The reports provided detailed fact, evidence and analysis of what had occurred and made recommendations for action.

The FFM recommended in 2018 that

the Security Council should adopt targeted individual sanctions, including travel bans and asset freezes, against those who appear most responsible for serious crimes under international law. It should also impose an arms embargo on Myanmar.[1]

and that

No business enterprise active in Myanmar or trading with or investing in businesses in Myanmar should enter into an economic or financial relationship with the security forces of Myanmar, in particular the Tatmadaw, or any enterprise owned or controlled by them or their individual members …[2]

It did not recommend the imposition of comprehensive economic sanctions on Myanmar as it considered that those sanctions would harm Myanmar’s very poor civilian population. Before Myanmar’s military took over the country in 1962, Myanmar was one of the richest countries in Asia. After fifty years of incompetent military dictatorship, it was one of the poorest countries in the world. The FFM considered that comprehensive economic sanctions would increase the people’s desperate poverty.

The following year, 2019, the FFM set out in a lengthy report what it could find about the military’s economic interests and the implications of disengagement.[3]

… the Tatmadaw uses its web of commercial interests, established through military-linked companies and subsidiaries, relationships with State-owned enterprises and private crony companies, to secure financial resources to support its activities and personnel. In doing so, the Tatmadaw insulates itself from accountability and oversight. Through controlling its own business empire, the Tatmadaw can evade the accountability and oversight that normally arise from civilian oversight of military budgets.[4]

The FFM reiterated its recommendations for complete economic disengagement from the military, while again rejecting comprehensive economic sanctions on the whole country. Basically, economic disengagement means not supporting any economic activities that directly or indirectly provide financial benefit to the military.

Removing the Tatmadaw from Myanmar’s economy will entail two parallel approaches. The first is negative, and requires the economic isolation of and disengagement from Tatmadaw associated companies. This includes the above-mentioned economic interests, as outlined in the Mission’s findings. The second approach is positive, and centres on the promotion of economic ties and engagement with non-Tatmadaw companies and businesses in Myanmar as a means of building and strengthening the non-Tatmadaw sector of the economy.[5]

The FFM made recommendations to the Security Council:

(1) Impose targeted financial sanctions against senior officials of the Tatmadaw responsible for violations of international human rights law and violations of international humanitarian law;

(2) Impose targeted financial sanctions against all Tatmadaw-owned companies, especially MEHL, MEC and their subsidiaries, while respecting human rights and significantly mitigating any adverse socio-economic impact of sanctions;

(3) Impose a comprehensive arms embargo on Myanmar and establish a mechanism to monitor and enforce it.[6]

It made recommendations to business:

No business enterprise active in Myanmar or trading with or investing in businesses in Myanmar should enter into or remain in a business relationship of any kind with the security forces of Myanmar, in particular the Tatmadaw, or any enterprise owned or controlled by them (including subsidiaries) or their individual members, until and unless they are re-structured and transformed as recommended by the Mission. These enterprises include in particular MEHL and MEC and all of their subsidiaries and business relationships. Relevant business relationships include granting loans to these companies or investing capital into their operations and procuring services from Tatmadaw related companies (including real estate rental).

The FFM’s three elements

The FFM’s analysis and recommendations relating to the Myanmar economy had three elements that remain critical today:

  1. no comprehensive economic sanctions on Myanmar as a whole, except for a global arms embargo
  2. complete economic disengagement from the military, military leaders and their families, and corporations and businesses owned or controlled by the military
  3. increased support for non-military sectors of the Myanmar economy, including the private sector.

The UN Security Council should be leading the way with a sanctions program along these lines. It has been singularly ineffective in the long-running Myanmar crisis, however. Nonetheless, individual states and groups of states, such as ASEAN and the European Union, can and should take action themselves and impose the range of targeted sanctions recommended by the FFM.

What the attempted coup is changing for business

On 1 February 2021 the military launched a coup. More than a month later the coup has not succeeded. At this stage it is still an attempted coup. As of today, 9 March, the opposition to the coup continues through mass demonstrations, civil disobedience and strikes. Banks have not opened for over a month. It appears that the economy has been brought to a standstill. The political opposition has formed a committee representing elected parliamentarians and it is seeking international recognition as the Government of Myanmar. The military’s struggle to take control is becoming increasingly repressive, including through violence on the streets and in townships and villages.

The first change brought by the attempted coup is that the relative stability of central Myanmar has been replaced with total instability. No one can predict what will happen or when. The simple inescapable fact is that at the moment it is impossible to do business in Myanmar. Under these circumstances, businesses should be supporting the anti-coup resistance by suspending all operations in Myanmar apart from essential humanitarian operations. Essential humanitarian operations must include health and medical care as the Covid-19 pandemic continues to rage in Myanmar and testing, vaccination and treatment are critical. Essential humanitarian operations must also include food production and distribution.

Second, if in the end the military imposes its rule by force, the scope of economic disengagement from the military will be widened. In the 2018 and 2019 reports, the FFM did not include state owned enterprises (SOEs) in the disengagement recommendation as SOEs were not technically military owned or controlled. They were technically under the control of the civilian side of the Government.

The UN Special Rapporteur on Myanmar, Yanghee Lee, was already raising concerns about SOEs in the natural resource extraction sector, however. In her 2019 report to the Human Rights Council, she said

The role of Myanmar’s natural resource extraction State-owned economic enterprises is also problematic, and much of their leadership is comprised of military and ex-military officials. Creating a substantial conflict of interest, they oversee regulation of their respective sectors, collect and allocate revenues, award licenses to private companies and operate commercial joint ventures. Between them, they either contribute to or regulate two thirds of the entire State revenue, but are not subject to appropriate checks and balances.[7]

If the attempted coup succeeds, the military will become the state and will control all arms of the state. SOEs will go under military control and so SOEs should be included in the scope of disengagement. Similarly, if the attempted coup succeeds, disengagement must also include the ending of budget support to the state, whether by way of grant or loan, as the state will be under the complete control of the military. Disengagement from the military must then include disengagement from the state, whereas in 2018 and 2019 it did not.

Third, if the coup fails, Myanmar will have the opportunity to start again, on a new and more democratic, more inclusive, more pluralistic basis. The military, having tried and failed to take control by force, will be discredited and shunned even more than previously. The constitution must be replaced by a truly democratic, truly federal constitution. The military must be placed firmly under civilian control, including civilian budgetary control by being stripped of all its economic and business interests. The removal of the military from the economy will create the legal and economic environment where corruption can be addressed seriously for the first time. It will open up greatly expanded opportunities for non-military businesses, local and foreign. Private business will be needed for the long-delayed economic development of Myanmar.

Myanmar’s only chance for a positive future lies in the defeat of the attempted coup and the subjugation of the military. We all have a stake in supporting that.

[1] UN document number A/HRC/39/CRP.2 para 1700.

[2] UN document number A/HRC/39/CRP.2 para 1717.

[3] UN document number A/HRC/42/CRP.3.

[4] UN document number A/HRC/42/CRP.3 para 178.

[5] UN document number A/HRC/42/CRP.3 para 182.

[6] UN document number A/HRC/42/CRP.3 para 186.

[7] UN document number A/HRC/40/68 para 8.